There are a couple of ways that a private company can go public. If you have not been funded by a venture capital firm and have revenues below $50 million a year your best alternative is the reverse merger route. The good news is that market conditions have almost no bearing on your proposed entry into the public marketplace.

There are some distinct advantages of using a reverse merger to go public.

• Compressed Timetable: Traditional IPO’s can take up to a year from start to finish. Most of the time senior management is not aware of the time it takes to transition from an entrepreneurial venture to a real public company. Spending seemingly endless meetings and drafting sessions with attorneys, investment bankers and accountants can have a disastrous effect and may affect the future of the company. In addition, during the many months it takes to put together an IPO, market conditions can deteriorate, closing the IPO window on a company. By contrast, a reverse merger can be completed in 45 days or less.

• Reduced Expenses: It can cost a company as much as $2,000,000 just to get your IPO prospectus on the street. That does not include underwriting fees to raise the capital you will need. On the other hand, the cost of a shell can be anywhere from $600,000 to $800,000.
  

• Guaranteed Approval for Trading: By reversing into a shell you are virtually guaranteed that you will be able trade the stock after the merger has been completed. Many companies, especially from China, have experienced long delays seeking approval by the SEC and NASD to trade their securities. There is sometimes a prejudicial view taken by the SEC towards companies that are not domiciled in the US.
  

• Listing Qualification: Because you will be listed on the Over the Counter Bulletin Board you do not have to meet stock exchange listing requirements for earnings, assets, minimum number of shareholders or the price your stock trades at.

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